Global Consumer Durables: Exploring Revenue Trends and Fundamentals

The consumer durables sector includes industries such as automobiles, auto parts, home furnishings, tools and hardware, electronics and appliances. The sector's sales are driven primarily by consumer sentiment, which is closely linked to employment and wages. Access to capital is also important, so interest rates and lending standards influence the rate at which big-ticket durable items are purchased. Geographic revenue exposure is closely linked to economy size, while currency fluctuations and economic growth have been the primary factors influencing shifting geographic sales mix.

Geographic Exposure

Revenue in the consumer durables sector was most heavily exposed to the United States in 2015, with that country accounting for 27.5% of global sales. China was the second-largest contributor at 13.5%, followed by Japan at 13.3%. Germany, the United Kingdom, South Korea, India and France completed the top eight exposures by country, in that order, with levels ranging from 3 to 5.5%. This list closely matches the rankings of gross domestic product (GDP) by country in 2015, indicating general economic activity is the primary determinant of consumption in sector. Per capita wealth also appears to play a role, with China having a small proportionate share and South Korea enjoying a somewhat larger one. While consumer durables are often large-ticket items, growing middle classes in countries such as China and India have shown willingness to purchase goods such as automobiles, electronics and appliances with their newly attained wealth.

The Asia-Pacific region was the largest regional contributor to global sales in 2015, with 39.9% exposure. The Americas followed at 33%, and Europe accounted for 23.5% of worldwide revenue. Africa and the Middle East held a much smaller slice of the pie at 3.6%. These regional figures reflect the country-specific data, with GDP being the primary determinant and per capita income representing a secondary factor. With large populations leading to larger economies, countries in the Asia-Pacific region contributed a higher proportion of consumer durables revenue relative to other sectors such as technology or consumer services, which rely more heavily on discretionary income. This reflects the more fundamental nature of consumer durable products. At 28.3% of revenues, emerging markets in general have contributed heavily to the sector's sales, relative to other sectors.

Growth and Outlook

India was the fastest-growing contributor among the top eight consumer durables revenue sources, rebounding with 10% growth in 2015. This growth was driven by accelerating GDP growth in the country, following regulatory reforms and macroeconomic stabilization. The United States also grew quickly in 2015, with 9.7% year-over-year (YOY) expansion in revenue contribution. The United Kingdom was not far behind at 7.7% growth. These latter two countries benefited from relatively strong economic fundamentals, and currency fluctuations further bolstered the rate of expansion.

South Korea's sales exposure fell 9.1% in 2015, and Japan's declined 7.1%. Currency played a major role for both countries in 2015, while Japan's economic condition also impacted the consumer durables sales in that country. Germany and France experienced more moderate reductions in exposure, with currency exerting negative pressure.

Consumer durables sales exposure in the Americas is expected to grow 190 basis points to 34.9% in 2016, driven primarily by strength in the United States. The Asia-Pacific region is expected to lose 101 basis points, with some of the larger economies in the region experiencing currency depreciation and GDP slowdowns. Europe's exposure is forecast to fall 50 basis points to 23%, with depreciation of the euro and economic pressures in some member states creating problems. Overall, developed markets are expected to contribute a larger proportion of consumer durables sales in 2016 than in 2015.